CH 11 Retirement

Joyce and Melvin have been married for 30 years. In 2017, they received $22,000 of Social Security benefits and had $12,000 of interest income. What portion of the Social Security benefit is taxable? A) $0. B) $6,000. C) $10,200. D) $11,500.

A ($0. Rationale The lesser of: 50% of $22,000 = $11,000 Or 0.5 [$12,000 + 0.5 ($11,000) - $32,000] < 0 Since the answer calculated is less than $0, none of the Social Security benefits received by Joyce and Melvin are taxable.)

Kathryn taught at Fun Academic University for 25 years and is filing for Social Security retirement benefits this year, when she turns age 72. Her PIA is $1,000 per month as adjusted for inflation. How much in benefits will she receive assuming her full retirement age was 66? A) $1,320. B) $1,360. C) $1,480. D) $1,587.

A ($1,320. Rationale Delayed benefits will increase at 8% per year of delay up until age 70. Therefore, her benefit will be 32% higher than her PIA. She has no increase for delaying beyond age 70 and the 8% increase is not compounded.)

Medicare Part A provides hospital coverage. Which of the following persons is not covered under Part A? B) Disabled beneficiaries regardless of age that have received Social Security for two years. C) Chronic kidney patients who require dialysis or a renal transplant. D) A person 65 or older entitled to a monthly Social Security check.

A (A person 62 or older and receiving railroad retirement. Rationale Medicare Part A requires a person to be age 65. People who are disabled or have permanent kidney failure are entitled to Medicare at any age.)

All of the following statements concerning Social Security benefits are correct except: A) In order to obtain SSI benefits, an individual must be age 65 or older and must be disabled. B) The number of days that Medicare covers care in hospitals and skilled nursing facilities is measured in what is termed benefit periods. C) The definition of disability is that the individual is unable to engage in any substantial gainful activity due to a physical or mental problem expected to last at least a year or expected to result in death. D) Benefits are payable at any age to workers who have enough Social Security credits and who have a severe physical or mental impairment that is expected to prevent them from doing "substantial" work for a year or more or who have a condition that is expected to result in death.

A (In order to obtain SSI benefits, an individual must be age 65 or older and must be disabled.)

Which of the following concerning the Social Security system is correct? A) SSI benefits are funded by the Treasury, not Social Security taxes, as are the other benefits. B) The Social Security retirement benefit is payable at full retirement age with reduced benefits as early as age 59 to anyone who has obtained at least a minimum amount of Social Security benefits. C) The two Medicare trust funds are the federal Medical Insurance Trust Fund for Part A and the Supplementary Hospital Insurance Trust Fund for Part B of Medicare benefits. D) Benefits can be paid to the dependent parents of a deceased insured worker at age 59 or over.

A (SSI benefits are funded by the Treasury, not Social Security taxes, as are the other benefits.)

Which of the following are correct? A) Surviving spouses are entitled to 100 percent of the worker's benefit amount after the worker dies. B) Divorced spouses can also claim benefits based on their ex-spouse's record if they were married 8 years or longer. C) For someone to delay benefits until age 70 based solely on payback or breakeven, the person would have to live to at least age 92, without considering the time value of money. D) All of the above are false.

A (Surviving spouses are entitled to 100 percent of the worker's benefit amount after the worker dies.)

Antoine immigrated from Italy last century, became a citizen and has worked the better part of his life in the United States, for which he is truly thankful. His full retirement age for Social Security benefits is age 66, but after a hard life working he wants to retire at age 63 and travel in America and back to his homeland. After contacting the Social Security administration, they informed him that his benefit at age 63 would be $1,200 per month. Just prior to retiring, he sold his business for $100,000. Which of the following statements is correct? A) The sale of the business will not impact the amount of his retirement benefits from Social Security. B) The sale of the business will cause his benefits to be reduced by $1 for every $2 over the annual limit. C) The sale of the business will definitely increase the portion of his Social Security benefits that are subject to income tax. D) The sale of the business may cause him to pay a higher Medicare Part B premium in the year of the sale due to his higher income.

A (The sale of the business will not impact the amount of his retirement benefits from Social Security.)

All of the following statements concerning Social Security benefits are correct except: A) The maximum family benefit is determined through a formula based on the worker's PIA. B) If a worker applies for retirement or survivors' benefits before his 65th birthday, he must also file a separate application for Medicare. C) People who are disabled or have permanent kidney failure can get Medicare at any age. D) The Social Security Administration is concerned with beneficiaries' combined income, which, on the 1040 federal tax return, includes adjusted gross income and nontaxable interest income.

B ( If a worker applies for retirement or survivors' benefits before his 65th birthday, he must also file a separate application for Medicare.)

Emile is single and received $28,000 of dividend income during the year. He also received $18,000 of Social Security benefits. What portion of his Social Security benefits are taxable? A) $0. B) $7,050. C) $9,000. D) $15,300.

B ($7,050. Rationale The lesser of: 85% of $18,000 = $15,300 or 0.85 [$28,000 + 0.5 ($18,000) - $34,000] = $2,550 plus $4,500 equals $7,050)

Antoine immigrated from Italy last century, became a citizen and has worked the better part of his life in the United States, for which he is truly thankful. His full retirement age (normal retirement age) for Social Security benefits is age 66, but after a hard life working he wants to retire at age 63 and travel throughout America and back to his homeland. If his benefit at age 66 is $1,000 per month, how much will he receive in Social Security retirement benefits if he begins receiving benefits at age 63? A) $700.00. B) $800.00. C) $812.50. D) $1,000.00. The same benefit, he will simply not receive it for as long.

B ($800.00. Rationale The benefit reduction for early retirement is 5/9ths of 1% for the first 36 months. If Antoine retires 3 years early at age 63, then his retirement benefit will be reduced by 20% to $800 per month.)

Betty Sue, age 75, is a widow with no close relatives. She is very ill, unable to walk, and confined to a custodial nursing home. Which of the following programs is likely to pay benefits towards the cost of the nursing home? 1. Medicare may pay for up to 80 additional days of care after a 20-day deductible. 2. Medicaid may pay if the client has income and assets below state-mandated thresholds. A) 1 only. B) 2 only. C) Both 1 and 2. D) Neither 1 nor 2.

B (2 only.)

Part B of Medicare is considered to be supplemental insurance and provides additional coverage to participants. Which of the following is true regarding Part B coverage? A) The election to participate must be made at the time the insured is eligible for Part A Medicare and at no time after. B) The premiums for Part B are paid monthly through withholding from Social Security benefits. C) Once a participant elects Part B, he must maintain the coverage until death. D) Coverage under Part B does not include deductibles or coinsurance.

B (The premiums for Part B are paid monthly through withholding from Social Security benefits.)

Which of the following concerning the Social Security system is correct? A) Workers entitled to retirement benefits can currently take early retirement benefits as early as age 59. B) A worker who takes early retirement benefits will receive a reduced benefit because he will receive more monthly benefit payments as payments commence earlier than if the worker had waited and retired at full retirement age. C) Family members of an individual who are eligible for retirement or disability benefits include a spouse if the spouse is at least 59 years old or under 59 but caring for a child under age 16. D) Generally, individuals who are over the age of 59 and receive Social Security benefits automatically qualify for Medicare benefits.

B( A worker who takes early retirement benefits will receive a reduced benefit because he will receive more monthly benefit payments as payments commence earlier than if the worker had waited and retired at full retirement age.)

Social Security is funded through all of the following except: A) Employee payroll tax. B) Employer payroll tax. C) Sales tax. D) Self-employment tax.

C (Sales tax.)

Brisco, now deceased, was married for 12 years. He had two dependent children, ages 10 and 12, who are cared for by their mother age 48. His mother, age 75, was his dependent and survived him. At the time of his death, he was currently but not fully insured under Social Security. His dependents are entitled to all of the following benefits except: A) A lump-sum death benefit of $255. B) A children's benefit equal to 75% of Brisco's PIA. C) A caretaker's benefit for the children's mother. D) A parent's benefit.

D (A parent's benefit.)

All of the following statements concerning the Social Security system are correct except: A) If a worker receives retirement benefits based on his own earnings record, the worker's retirement benefits will continue whether married or divorced. B) Widows and widowers, whether divorced or not, will continue to receive survivors' benefits upon remarriage if the widow or widower is age 60 or older. C) By providing the name of a country or countries to be visited and the expected departure and return dates, the Social Security Administration will send special reporting instructions to the beneficiaries and arrange for delivery of checks while abroad. D) A special one-time payment of $1,000 may be made to a deceased worker's spouse or minor children upon death

D (A special one-time payment of $1,000 may be made to a deceased worker's spouse or minor children upon death. Rationale A special one-time payment of $255 may be made to a deceased worker's spouse or minor children upon death.)

A person receiving Social Security benefits under the age of 65 can receive earned income up to a maximum threshold without reducing Social Security benefits by the earnings test. Which of the following count against the earnings threshold? A) Dividends from stocks. B) Rental income. C) Pensions and insurance annuities. D) Gambling winnings.

D (Gambling winnings.)

Antoine immigrated from Italy last century, became a citizen and has worked the better part of his life in the United States, for which he is truly thankful. His full retirement age for Social Security benefits is age 66, but after a hard life working he wants to retire at age 63 and travel in America and back to his homeland. He sold his restaurant for $150,000 and was retained by the acquiring company as a consultant for a one-year period. His consulting fee this year will be $50,000 and the benefit he expects to receive from Social Security is $2,000 per month. Which of the following statements is correct? A) He should delay receiving Social Security retirement benefits until after this year because he will be in a high tax bracket due to the sale of his business. B) He should delay receiving Social Security retirement benefits until after this year because there will be such a large reduction in benefits due to his consulting income and the sale of the business. C) He should begin receiving Social Security benefits today because although there is a reduction in benefits today, there will be an increase after full retirement age. D) He would be better off beginning Social Security benefits next year.

D (He would be better off beginning Social Security benefits next year.)

Robin Elizabeth qualifies for a retirement benefit of $250 and a spouse's benefit of $400. At her full retirement age, she will receive which of the following? A) Both $250 and $400. B) The higher of her benefit or her spouse's benefit. C) Her spouse's benefit of $400. D) Her benefit of $250 plus $150 from her spouse's benefit.

D (Her benefit of $250 plus $150 from her spouse's benefit.)

A worker's AIME: A) Must be determined by converting actual earnings into current dollars through an indexing factor. B) Is determined from wage information over prior years' work. C) Uses the highest 35 years of indexed earnings (for workers that worked at least that long). D) Yields an average amount of monthly earnings for all indexed years. E) All of the above.

E (All of the above.)